AutoZone 2004 Annual Report Download - page 16
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Please find page 16 of the 2004 AutoZone annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.17’04AnnualReport
WhatwerethehighlightsofF2004?
FinancialhighlightsforF2004includerecordearnings,earningsper
share,andrecordreturnoninvestedcapital.
Regardingourstores,wesuccessfullyopenedanet201newAutoZone
locationsinF2004.Thisrepresentedmoresubstantialgrowththan
inthepastseveralyears.
WealsocontinuedtodevelopourcommercialprograminF2004as
wemarkedthecompletionoftheMidasintegrationeffort.Ourability
tosupportMidas’approximately1,700dealersacrosstheU.S.with
weeklydeliveries, whilecontinuingto deliverto our3,400stores,
wasagreataccomplishment.
WastheCompanysatisfiedwithitssamestore
salesgrowth?
Wewerenotsatisfiedwithsamestoresales,butweareneversatisfied.
Wefoundourselveschallengedbysomemacrotrends,likehigher
gasolineprices,thathadaveryrealimpactonconsumerexpenditures
andoursalesduringourfourthquarter.Despiteflatsamestoresales
resultsfortheyear,westillincreasedearningspershare23%.
WhatareAutoZone’sprospectsforF2005?
F2005willbeAutoZone’syearfor“WOW!CustomerService,”and
we’vegottoliveuptothatgoaleveryday.Asourcompetitionhas
improvedandopenedlocations(oftentimesrightnext tous),we
must continue to provide our already industry-leading customer
servicetoencourageeveryoneto“GetintheZone”fortheirvehicle
solutions.TrustworthyadvicefromourAutoZonersdifferentiatesus
fromourcompetition.
RegardingourmerchandisingeffortsinF2005,wewillcontinueto
improveourmix.Aswerefineourinventoryefforts,wewillbebetter
abletoserviceallourcustomers’needs.Wewillcontinuetofocus
onhavingtherightpartintherightplaceforallmakesandmodels
ofvehicles.
Howsustainableareyourindustry-leadingoperating
margins,andwhatareyourtargetsforF2005?
AutoZone continued its focus on category management initiatives
andcostcontainmentprojectsthroughoutF2004todrivemarginsto
recordlevels.Whileweareproudofourindustry-leadingmargins,
wearenotfixatedonatargetedmargin.Wearefocusedonoptimizing
shareholder value by executing initiatives that exceed our 15%
after-tax internal rate of return goal. We expect these projects’
ROIC,intheirearlyyears,tonotachievetheoverallCompanyROIC.
The important point is these initiatives easily exceed our cost of
capitalandcreateshareholdervalue.
Whatisourdebtstrategy?
Wewillcontinuetomaintainourdebt(includingleases)inproportion
toourcashflow.ThemetrictheCompanyutilizesis2.1xEBITDAR
(earnings before interest, taxes, depreciation, amortization, and
rentwhichwebelievewillcontinuetoprovideAutoZonewithastrong
investmentgraderatingandaccesstocapital).Debthasacheaper
cost of capital than equity, and therefore, utilizing debt allows
AutoZonetoreduceitsoverallcostofcapital.
Howfarcanyoutakepay-on-scan?
Pay-on-scan(POS)isonemoretoolinourtoolboxtoreduceinventory
risk.Weexpecttheinitiativetoallowustointroducemoreproduct
intoourstoreswithlessriskofmarkdowns.Further,webelieveitwill
improve the industry focus on increasing sales, while reducing
workingcapital.Lastly,POSallowsustotestnew,innovativeprod-
uctswiththeabilitytoreturnthoseitemsthatdonotsell.
Whydoesn’tAutoZonegiveearningsguidance?
Wedon’tgiveguidancebecausewearenotmanagingthebusiness
toaspecifictargetasthatcouldactuallyinhibitperformance.We
willworktodeliverourbestresultseveryday.
WhatisAutoZone’sviewofcorporategovernance?
Simplyput,AutoZonersequatepracticinggoodcorporategovernance
withalwaysdoingtherightthing.
AtAutoZoneweexpectemployeestoperformatthehighestlevels
ofethicsregardingallbusinessdecisions.AutoZone’sprimarygoalis
tooptimizelong-termshareholdervaluewhileadheringtothelaws
of jurisdictions where we operate and at all times observing the
highestlevelsofethicalstandards.WeaskallAutoZonerstoread
and sign a Code of Conduct which embodies all rules regarding
individual responsibilities, as well as responsibilities to AutoZone,
thepublicandothers.
PracticinggoodcorporategovernancealsoextendstotheBoardof
Directors,whoactingonbehalfofallshareholders,shouldperformat
thesamehighlevelsofethicalbehaviorasourcorporateofficers.
In order to make sure there is adherence to these standards, the
Board’s Nominating and Corporate Governance Committee has
established guidelines as to what skill sets are ideally suited by
candidatestobepotentialboardmembers.Individualdirectorsshould
possessmanypersonalcharacteristics,nonemoreimportantthan
practicingthehighestlevelsofintegrityandaccountability.
StraightTalkonAutoZone’s2004FinancialPerformanceandBeyond
AninterviewwithAutoZone’sCFO,MikeArchbold